The corporate regulator is worried vulnerable workers are getting stiffed by default superannuation funds, warning trustees about using “improper inducements” to incentivise businesses.
ASIC says it’s prepared to wield new laws which set out tougher penalties for quid pro quo arrangements, noting the exchange of goods and services to influence businesses in their nomination of a default super fund is illegal.
Harsher penalties were implemented earlier this year by the federal government in response to recommendations made by the financial services royal commission.
During the royal commission, it was revealed large superannuation trustees have been spending “significant amounts” to establish relationships with employers and their superannuation officers.
Under current laws, employers nominate a default super fund which is offered to employees when they’re onboarded, however, businesses aren’t required to consider their employees’ best interests when nominating a default super fund.
Up to two-thirds of Australian workers use default super accounts and at least 1.6 million of these workers are in underperforming funds, according to 2018 Productivity Commission research.
ASIC commissioner Danielle Press said the regulator wants to see super products promoted on their merits, not on incentives.
“ASIC is concerned because employees who are not engaged with their super are particularly vulnerable to negative financial outcomes as a result of poor employer decision-making,” Press said in a statement circulated Wednesday.
“We expect the recent changes to the law will ensure that super trustees are promoting their products to employers on their merits, rather than the inducements they can provide. ASIC’s new guidance will make it easier for them to understand their new obligations, and not engage in potential misconduct.”
While there’s a view among some employers the entire default super nomination process should be scrapped, the Productivity Commission and others regard it as a necessary part of Australia’s mandatory super system.
Human resources experts advise businesses to engage with their workers and put thought into their default fund with the interests of their employees in mind.